An identity theft victim
whose name and personal information were used without authorization to acquire
real property is entitled to the surplus funds from a foreclosure sale of the
property where she is the sole claimant to those funds, this district’s Court
of Appeal ruled yesterday.

Div. Five unanimously
reversed an order by Los Angeles Superior Court Judge Alan S. Rosenfeld
directing that undistributed surplus funds from a trustee sale be paid into the
Los Angeles County general fund.

Rosenfeld issued the
order after rejecting Aurora Lepe’s sole unopposed claim to the undistributed
surplus funds on the grounds that Lepe was not the actual trustor of the
property and had no connection to it.

But the panel agreed
with Lepe in her unopposed appeal that she had an equitable right to the
surplus funds generated by the trustee sale, because her name and social
security number had been used fraudulently to obtain funding for the purchase
of the property.

An unknown perpetrator
had used Lepe’s name and personal information to obtain a purchase money loan
for property secured by a deed of trust, signing Lepe’s name on a promissory
note as maker and on a deed of trust as trustor. Upon foreclosure of the deed
of trust, CTC Real Estate Services as trustee sold the property and was left
with a surplus of $51,333.87.

CTC filed a petition and
declaration regarding the surplus funds, saying Lepe was equitably entitled to
the funds but that since she was not the actual borrower and trustor of the
foreclosed deed of trust, it was unable to distribute the funds to her.
Rosenfeld granted CTC’s request that the court deposit the surplus funds less
its attorney fees and costs and discharge it from further responsibility.

Writing for the
appellate panel, Justice Richard M. Mosk said that Lepe had an equitable right
to the surplus funds under the “peculiar circumstances” of the case, where the
facts were undisputed and Lepe’s was the sole unopposed claim to the funds.

“The mere fortuity that
the wrongdoer has disappeared without receiving the surplus and is not subject
to legal action should not, as a matter of equity, preclude Ms. Lepe from being
able to recover the funds not in the possession of the identity thief,” he
wrote.

“Although one might
argue she is gaining a windfall,” the justice said, “a victim is entitled to
trace stolen assets into other assets and obtain the final product even though
it may exceed the value of that which was stolen.”

Mosk added that there
was evidence Lepe suffered “substantial damage” as a result of the theft,
including a Chapter 13 bankruptcy proceeding filed in her name without her
knowledge, a damaged credit record, and the inability to borrow money for a home
she intended to purchase.